Oil Prices Come Off Record High

Worries about Russian supplies ease as Moscow says there will be no cut in exports from Yukos.

Oil prices fell back slightly Thursday after closing at a new record high Wednesday as traders responded to the latest developments in Russia, where the country's largest oil company Yukos is involved in a high-stakes tax battle with the government.

The benchmark U.S. crude closed 15 cents, or 0.3%, lower at $42.75 a barrel. Prices yesterday jumped 2.5% to $42.90, a new record high that eclipsed the previous record of $42.33 set June 2. At one point during the regular floor trading session, prices briefly touched $43 on the New York Mercantile Exchange.

The decline Thursday came as the Russian government said Yukos can continue with business as usual, after the company Wednesday suggested it might have to stop exports from its Siberian production unit as a result of a government crackdown meant to collect disputed back taxes.

Traders have been worrying about the potential for such a drop in exports for several weeks, with speculation growing that Yukos might be forced into bankruptcy should the tax dispute escalate. Russia is the world's second largest oil exporter after Saudi Arabia and the world's largest independent producer. The country's oil sector has ramped up production in recent years after a long decline that started in the waning days of the Soviet Union.

Also driving the market Wednesday were two closely watched weekly reports on energy levels that showed contradictory results. The American Petroleum Institute said crude inventories for the week ended July 23 fell, while the Energy Department reported a small gain.

Traders have been focused on a number of short-term supply issues in recent months -- such as attacks on Iraq's oil infrastructure, strikes in Nigeria and Norway, the Yukos tax dispute, and periodic terror attacks on oil workers in Saudi Arabia -- that have caused routine price spikes. Unusually strong global demand -- partly because of the roaring Chinese economy -- has also contributed to worries about supply, despite efforts by the Organization of Petroleum Exporting Countries to calm the markets.